Written By Larry R. Sandrin and James Struthers
Amendments to the BC Real Estate Services Regulation Target Unethical and Predatory Conduct by Licensees; Further Recommendations Forthcoming
Government will not tolerate unethical or predatory conduct in the real estate market - Premier Christy Clark
On May 10, 2016, BC Finance Minister Michael de Jong announced amendments to the Real Estate Services Regulation regarding the imposition of additional obligations on licensees (persons described in s 2 of the Real Estate Services Act) as part of a broader initiative by the Province to improve public confidence in the real estate services sector (the amendments are available on the BC Laws website). Licensees acting for buyers must include in any offer to purchase a clause that indicates the purchase contract will not be assigned without the written permission of the seller, and that any profits from an assignment of the contract must be returned to the seller. If any offer does not include these terms, licensees acting for a buyer are obligated to notify the seller of their absence. Licensees acting for a seller must inform the seller whether the contract may be assigned, any conditions on assignment and the seller's right to profits from an assignment. These amendments are in force as of May 16, 2016.
There are no designated penalties for a breach of these new regulations at this time, but changes to monetary penalties under the Act and Regulations may be coming. Additional changes to rules and regulations governing licensee conduct, the administration of these rules and regulations and public access and engagement are expected to be released in early June.
In a letter to Marylou Leslie, Chair of the Real Estate Council of BC, Superintendent of Real Estate Carolyn Rogers noted that "[p]ublic confidence in the integrity of the real estate services sector and its regulations have been shaken". The Province of BC has responded to these concerns by passing new regulations regarding the conduct of licensees so as to protect sellers against improper contract assignments (shadow flipping) and misuse of limited dual agency (double ending). The regulations are intended to empower sellers by providing for full disclosure, informed consent and the opportunity for sellers to insist they receive any resulting financial benefit.
These amendments do not impose restrictions on the use of assignment of contract clauses, rather they impose additional obligations on licensees to increase transparency and protect sellers' interests. The regulations mandate that licensees include, in their offer to purchase, terms that make an assignment subject to the seller's approval, and that any profits from the assignment to be returned to the seller. If the buyer wants to remove these terms from the agreement, the buyer's licensee must provide the seller with a Notice to Seller Regarding Assignment Terms. In addition, the seller's licensee must inform the seller of the absence of these "Standard Assignment Terms" as well as whether the contract may be assigned, and whether the seller is entitled to the profits of the assignment. These obligations apply to dual agents. More information regarding obligations and suggestions for licensees is available via the Real Estate Council's website.
These regulations do not apply to purchase agreements fully executed before May 16, 2016, or to the sale of a "development unit" by a "developer" as defined in the Real Estate Development Marketing Act.
On February 22, 2016, the Independent Advisory Group (IAG) was established by the Real Estate Council of BC to assess the conduct and practises of real estate licensees and the effectiveness of current regulations in light of these public concerns. The Terms of Reference set out the scope and focus of the IAG. The IAG's primary concern is whether the existing system adequately protects consumers and the wider public interest. The Final Report is set to be released in early June, and will include further proposed changes regarding rules and requirements governing licensee conduct, administration of these rules including the scope and severity of punishments, the structure and capacity of the Real Estate Council of BC, the quasi-regulatory role of other industry organizations like the MLS, and public access and engagement. Progress Reports have been submitted to the Real Estate Council that highlight their progress, and primary areas of concern.
We invite readers to revisit Bennett Jones' website in early June for more information anticipated to be available on the IAG's recommendations.